Economics in Everyday Life

Neal Conan does a nice interview with economist Robert Frank, who is on the road promoting a new book. Lots of good stuff here about economic anomalies from everyday life, as well as how we deviate from the classic economic framework and why.

Frank also makes a strong case that Charles Darwin offered a more powerful framework for economics than did Adam Smith. Some interview goodness:

I think we’ll look back 100 years from now and reject the idea that Adam Smith really laid the groundwork for modern economics. That’s the conventional view now. I think when we look back 100 years from now, we’ll recognize that it was really Charles Darwin who laid the foundations for our discipline.

He had a very much more subtle view of competition than Adam Smith’s modern disciples do. I think the idea of the invisible hand was a good idea, you know, the idea that producers compete with one another to expand their market share and that consumers ultimately benefit from that when they cut their prices and come up with cost-saving innovations in the process. That’s true. It happens often, but Smith was under no illusions that you always turn selfish people loose, you get good outcomes. It was really Darwin who saw clearly that the evolutionary forces really operate on the individual’s interest, not on the group’s interest. And often they coincide, but often they don’t.

Human brains forged by natural selection do not work as assumed in economic textbooks.